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Financial foundation for freelancers

Transcript

00:00:05 TONYA: Greetings, all of you Freelancers yearning to be financially stress-free. It’s time to take control. I’m Tonya Rapley. Welcome to a new series from State Farm and Let’s Start Today. This is where you’ll find the tools, support, and education you need to take control of your finances today and reach your goals for tomorrow. These helpful courses are inspired by an ever-evolving learning lab, known as Next Door State Farm.

And speaking of Next Door, I’m here with John, who is a financial coach at Next Door State Farm.

00:00:37 JOHN: Thanks for having me.

00:00:37 TONYA: And Krystal, who is a State Farm agent.

00:00:37 KRYSTAL: Thanks for having me here.

00:00:40 TONYA: Thank you guys for joining me. So today’s course is called Financial Foundation for Freelancers. Are you guys ready to enlighten and empower?

00:00:48 KRYSTAL: Yeah, let’s get to it.

00:00:49 TONYA: Before we do that, I want to go over the agenda, which is: An overview of the freelance world, identifying your financial goals as a freelancer, Creating that budget in a budget overview for freelancers, wait, I don’t work for a corporation, and credit factors and action steps for freelancers. How does that sound to you guys?

00:01:09 KRYSTAL: Sounds good.

00:01:10 TONYA: All right. So let’s have some fun. Let’s dig into it. First things first; what is a freelancer?

00:01:15 JOHN: Freelancer essentially is somebody that doesn’t work for a corporation or really doesn’t work for anyone else, right? They work for themselves, typically working 1099 contract-types of gigs and they kind of have to look out for themselves.

00:01:32 TONYA: You don’t have that team that maybe a traditional entrepreneur might have, or someone who works for a corporation. It’s really you, and decisions start and fall with you.

00:01:38 JOHN: Exactly.

00:01:40 TONYA: Let’s have a look at what we’ve learned.

(Music / Chapter 1 Ends with Key Takeaways slide)

(Chapter 2 Begins)

TONYA: So in creating your financial goals of the freelancer, there are probably different things you want to take into consideration, but you still want to set those goals, right?

00:02:04 JOHN: Absolutely. I mean, freelancer or not, your goals are going to be really important, because without them, you don’t really know what your striving for. You don’t know if you’ve accomplished something without setting those goals to begin with.

00:02:15 TONYA: Right. How do you know if freelancing is working for you?

00:02:17 JOHN: Right.

00:02:21 KRYSTAL: You have to set those checkpoints, I call them. You know, like checkpoints in my career. Where am I at? Do I need to add a team? Can I do this alone? So you have to understand the next levels or the next steps that you’re taking. So goalsetting is the foundation of everything.

00:02:31 TONYA: Yeah, and just because you’re a freelancer now doesn’t mean that you have goals of growing and creating a business and growing that business is that you have a team to help you make decisions. So that might be a financial goal you want to set. But regardless of what your goal is, we always want to make sure that we’re writing that goal out, right? Because if you don’t write it down, it’s not real.

00:02:48 JOHN: I mean, writing it down is a great step. You want to make it real. Not only that, but being very tactical with it. so you may say that I want to have a team of five people within the next three years. That’s great. You always want to have it be tied to a timeframe or dollar amount, depending on when that goal is to make it a lot easier to actually build that action plan.

00:03:05 TONYA: Yeah, and freelancers have goals. I know, my husband is a freelancer and we still have goals. We still want to buy a house. We still want to do things. So freelancers have goals, too.

00:03:13 KRYSTAL: When you talk about setting short-term or long-term goals, it’s kind of like buying a house, which is a short-term goal. But then long-term, you might be like, I want to buy real estate. I want to buy…

00:03:23 TONYA: A building!

00:03:23 KRYSTAL: Yeah! So but how do you get there? Like, what are the goals you have to set to get through the steps that happen?

00:03:28 TONYA: And I’m happy you said that Krystal, because I think that sometimes we have to look at our goals as what are the steps? We break them down. So we say, okay. I need to save this amount of money. So my long-term goal is to buy a building, but my short-term goal might be to pay off my debt so that I can get approved for that building. And then build my emergency fund so that I can begin to focus on saving for that building. So your goals, they happen in steps.

00:03:52 JOHN: And a good rule of thumb as far as those short, medium, and long-term goals is typically we think of a short-term goal within the next 12 months or so; medium term about a year to five years, and anything longer than five years, consider that maybe a long-term goal.

00:04:04 TONYA: Yeah, so for the freelancer who’s like, oh man, I’ve never set any goals. What do you guys think they should do? What is a good rule of thumb for getting your first goal out there?

00:04:13 KRYSTAL: Write it down, as soon as possible. They call me the Post-It girl in my office, because I always, if I have a thought in my head or something that I say I want to do or accomplish, I write it down immediately so I can get it out of my head, onto paper, and see it in front of me.

00:04:26 TONYA: Yeah, and committing it to memory.

00:04:27 KRYSTAL: Yeah. Yeah. So it’s a commitment, yeah.

00:04:31 TONYA: Yeah, it’s so powerful when you commit that goal to memory. And so you know what? I’m going to put this everywhere that I look, so that I can make sure I don’t forget about this goal.

00:04:38 JOHN: Yep. Bathroom mirror, your computer at work. That way you’ll see it all day, every day.

00:04:43 KRYSTAL: It’s actually right next to my closet so when I stop and look to the right, my goals are right there staring me in the face. They’re at eye level and right there staring me in my face.

00:04:49 TONYA: You know one of the big waves right now is inaud. parties. So that’s like setting short-term or long-term goals. So that’s awesome to do. If you’re a freelancer, I mean, sometimes you may not want to communicate, but it’s best to kind of collaborate with other freelancers and visualize together. I don’t think a lot of people realize that like taking it outside of your home and putting it on your phone or somewhere that you look regularly, so like every time you go to unlock that screen, your goals and dreams are staring you in the face. Nothing like that to remind you, hey, get it together.

00:05:16 JOHN: Yeah, right?

00:05:17 TONYA: So what we’re saying essentially is that freelancing isn’t much different from a traditional job. you still need to set those goals and make sure that you’re doing everything in your power to achieving them. Let’s have a look at what we’ve learned.

(Music / Chapter 2 Ends with Key Takeaways slide)

(Chapter 3 Begins)

00:05:48 TONYA: All right. So now we have that goal. We need a budget, right, because a budget is that plan. So budgeting for freelancers, how different is it?

00:05:56 JOHN: A budget’s a budget. But as a freelancer, you’re probably going to want to have a budget for personal and a budget for business. So having those things separate makes it a lot easier on a day-to-day basis, and especially when you go to talk to the tax man, right? Making it easier when it comes to that. But the building blocks of the budget starts essentially with fixed expenses. These are expenses that you know you’re going to have every single month. They typically don’t have a lot of short-term flexibility. And for these, think, your rent or your mortgage, or your bills; cell phone bills. And keep in mind, maybe you have some expenses that are going to be for the business. And like I said, that might be a reason why you want to have those separate.

00:06:35 TONYA: Yeah, and then you have your variable expenses. So your fixed expenses, you can count on those being the same every month. Your variable expenses, you can count on having those bills each month, but sometimes they fluctuate, so that might be your electricity or it could be your gas if you live somewhere where they have gas, or it could range – even if you have someone who works contract with you, so looking at a business, if you have someone who works contract with you and their hours fluctuate. So maybe this month they helped you for five hours, but last month they helped you for twelve hours. That’s going to fluctuate as well. It’s still an expense, but it’s not the same each and every month.

00:07:07 KRYSTAL: That’s a great point. One of the biggest things I think that you had mentioned, John, is keeping the personal and the freelancer budget separate. Because a lot of times the freelancer, because they are flying solo, they think all the bills are combined. But you have to, this goes back to setting those goals, because if you’re setting goals for your personal life and your freelancer life, they look totally different.

00:07:26 TONYA: Yeah.

00:07:28 KRYSTAL: So the budget should look totally different. The fixed expenses should look different. The variable will look different as well. You know, especially with marketing and things of that nature, building your brand. So you have to be aware of those types of things and the expenses that you will actually face.

00:07:42 TONYA: Yeah, definitely. And then we have those non-monthly. So slightly different from the variable expenses, which you can count on to happen every month, you have those non-monthly expenses. So the non-monthly expenses, they might happen six months out of the year, three months out of the year, two months out of the year. That might be website redesign project, or that might be a personal expense, such as going away for a holiday vacation with your family, or participating in a wedding or attending a wedding. You want to make sure that you’re budgeting for those things.

00:08:07 JOHN: Yeah, a simple way to think about that is it’s a non-monthly expense. You know you’re going to pay for it whether it’s an annual webhosting fee or whether it’s a wedding you’ve got to get to; how much is that expense? How far away is it? And then divide the expense by how far away it is and that’ll give you a good idea of how much you should be setting aside each month for that particular expense.

00:08:26 TONYA: You know, one that gets me every year is domain registration. I forget about my domain registration yearly, but now I’ve had to write it down and say Tonya, you know what? Every year…

00:08:36 JOHN: You know it’s going to happen.

00:08:36 TONYA: You’re going to have to pay this, because we forget about those things because we’re not paying them monthly. But it doesn’t mean they don’t need to be paid.

00:08:45 KRYSTAL: It’s those little things, you know. And as we talked about taking a closer look at our budgets, when you’re a freelancer, your income fluctuates. So if you have these fixed, these variables, and then you have these non-monthly bills, how do you prepare for that? So having that budget set aside, one of the things that I do as running a business, I make sure that I take a couple of months, I average that out. What does that look like with my income coming in? What are those types of different expenses that I have? And I try to stick to those different things so that I know this hard number. So as a freelancer, you need to know that hard number so that you don’t go over or below it. Just because you may have that wonderful month.

00:09:24 TONYA: And I love that about being, about creating a budget, right? Because when you create a budget and you understand what your expenses are, you have that baseline number, no matter what happens, I need to bring in this income each month. And speaking of income, it’s important to understand, as a freelancer, your income is slightly different. It may fluctuate, but your income’s not really your income, because now you have business expenses that you need to operate.

00:09:47 JOHN: Exactly. Yeah, I mean if the money coming in and the expenses that you have, business and personal, you’re going to take that away from the income, and then hopefully we have a positive number left over at the end of the month, right? And that’s going to be your disposable income. Or we also call that money for our goals. So whether that’s a personal goal, whether that’s putting money back into the business, ramping up marketing, buying more inventory; whatever that looks like, we want to end up having more money come in than the expenses that are going out.

00:10:14 TONYA: Yeah, because then you’re operating in the negative.

00:10:16 JOHN: Don’t want to do that.

00:10:17 TONYA: And that is stressful. That definitely is stressful. And I know that sometimes people say, “You know, as a freelancer, I don’t have a set income each month. It fluctuates. Some months are amazing, and some months I’m wondering why do I even do this?” So when it comes to setting some of those goals, like your emergency fund, make sure that you’re saving or contributing to your retirement, you can do a percentage-based allocation instead of that flat dollar amount that you might have if you had a consistent income.

00:10:44 KRYSTAL: And another thing that, like you talked about the emergency fund. There can also be different types of funds, like your growth fund, as well. Or things such as if you have a branding fund, like marketing. You could have money when you have that great month and want to put xyz into this account. So you can kind of be prepared for those types of things. So budgeting out when you’re getting that big check, not using it as boat money. You buy everything you can because you won for the month. So, just preparing.

00:11:10 TONYA: And definitely, John, I’m sure that you probably see customers all the time who, they’re freelancers, they’re doing pretty good. But they want to make sure they’re doing right by their budget and to make sure they’re saving and so forth. So as far as saving for freelancers, what is a good emergency fund? Because I think a lot of people are confused by that.

00:11:22 JOHN: So yeah, emergency fund. It’s a term we probably all heard of before. Ideally, it’s anywhere from three, six, or nine months of essential living expenses. So if you take a look at your budget, and I encourage you to go home, write down all the fixed expenses. Write down all of your variable expenses, like Krystal said. Take a look at a good two, three month average. But basically where your money’s been going. This gives you a good baseline of seeing kind of where the money’s been going to help you, inform you, of maybe decisions you want to make moving forward, right?

So like I said, write it all down and put stars next to all the expenses that you know every single month you have to have. That’ll give you a good idea of kind of what is one month of essential living expenses, and think of that three, six, or nine or any of the months in between; really, whatever lets you sleep at night, is what an end goal would be for an emergency fund. Now of course, if you’re thinking six, seven, eight, nine months, that can be a pretty big number. Try not to get intimidated with that. Just having a separate account, like you guys were talking about before, but one specifically for emergencies. And when we’re talking emergencies, we’re basically talking unexpected car repair, unexpected home repair, unexpected medical expenses, and the big one, loss of income/lose your job, which is especially important as a freelancer because you do have that fluctuating income.

00:12:38 TONYA: We have stages, right, John? There are these stages that I think freelancers need to be aware of.

00:12:44 JOHN: Yeah, so being in business for yourself, we think about the budget in kind of three stages. Stage one, taking a look at your budget. We talked about these fixed, variable, non-monthly expenses. Again, just to recap real quick, the fixed being those expenses that happen every single month, typically your bills. Variable, those everyday living expenses. And non-monthly expenses being those expenses that don’t happen every single month but you know you should be setting a little bit aside for each month. And taking a look at those and writing them all down. Look at your expenses and put a little star next to the ones that you know you have to make every single month, kind of like, essentially, food and shelter. Your bills, you know, you have to pay them. That’s like stage one. Add up all those expenses and that gives you what we call your break-even number. So ideally, and especially if you’re just starting out, that’s the number that you want to strive for each month income-wise so that you can at least break even each month.

Stage two, so one we were comfortable with that, you start to make a little bit more money, and then hopefully you’re able to start putting a little bit more of these expenses back in. maybe you’re able to dine out a little bit more or shop a little bit more. Essentially, adding a little bit more than just what the stars are, right?

00:13:56 JOHN: Exactly. And then we keep; we’re making more money, doing more business. Then we get to stage 3 which we call the Shangri-La of stages. You’re making enough money at this point that you actually have decided a number that you’re going to pay yourself each month. And basically, you’re paying yourself a salary out of the income that your freelance gigs are generating. And just sticking to that and that’s where you want to get to, right? That’s the stage 3 that you’re striving for.

00:14:23 KRYSTAL: That’s the sweet spot.

00:14:25 TONYA: So as a freelancer, it’s probably likely that you’ll have a personal budget and you’ll also have a business budget so that you can achieve your personal goals and your business goals. Let’s have a look at what we’ve learned.

(Music / Chapter 3 Ends with Key Takeaways slide)

(Chapter 4 Begins)

00:15:05 TONYA: Okay, so now we have that budget. But wait! I don’t work for a corporation. As a freelancer, what are things that we can do to navigate that space between working for a corporation, working for yourself, not fully operating your business? You still have basic needs, right?

00:15:23 JOHN: Yeah, I like to call this BYOB, bring your own benefits, right? So typically, when you work for a corporation, things like health insurance, life insurance, disability, retirement; those things are more often than not included. So we can just go through and hit a few key points on these. You know, health insurance is a big one. So as far as what the rules are on health insurance, I encourage everybody to go research that on their own and what’s going to apply to them. But a couple of just kind of break down some jargon with health insurance. A lot of times you’ll see something called a copay, and that’s typically when you go to a doctor’s office, what if anything will you have to pay out of pocket. Coinsurance, which is just a percentage of the bill that you’ll have to pay after you’ve met your deductible. And then the two big terms that apply to a lot of insurance policies, deductible and premium, which the deductible is what you have to pay out pocket before the insurance kicks in, so to speak. And then premium is what you have to pay month to month or annually, however that’s set up, to essentially keep the insurance active.

00:16:24 TONYA: Yeah, and I think you have to choose what works for your family, right?

00:16:26 KRYSTAL: I agree with that because sometimes we kind of disregard about our health and how serious that is. So when you think about is something happens, because you are a freelancer. You’re the main breadwinner. What do you have in place to get you back active and back into the workforce? So you have to preplan for that as well. That’s a part of setting your goals is like, if something happens, what’s my Plan B? How do I jump back from that? So understanding and researching and seeing what best fits for you, especially in the healthcare field, you’ve got to know what your options are.

00:16:57 TONYA: Yeah. And there’s a lot of options out there and it can seem daunting. So by doing your research, it’s easier to find, you know, this works for me; this doesn’t work for me. And shop around. There are options out there. And so we have health insurance. What about life insurance? Because you need life insurance as a freelancer, too.

00:17:14 JOHN: I mean, like Krystal just mentioned, being the sole breadwinner, you know, whether it is just you or whether you have a family with you. And if you are the only person generating income, disability insurance, life insurance, these are big things that you need to kind of sit down and have a conversation with yourself or with your family and decide what’s going to be right for you. A lot of those same principles apply as far as the premium to the life insurance policy, how much life insurance do you think you need is going to be a big thing, depending on what sort of, going back to those fixed expenses, the bills, if there’s a mortgage.

00:17:51 TONYA: Like how much life insurance you need? If someone’s like, okay, I’m going to get life insurance. How much life insurance do I need?

00:17:57 KRYSTAL: What I typically do with a customer is look at about three years, three to five years of what can your family survive on? Can they survive for the next three or five years and also for your burial as well. And then, plus, the legacy you built. If you left debt, or if you grew a huge company, like say for instance if you’re a freelancer and you grew a great clientele and there’s different types of things that you’re leaving behind; how do you protect it? How do you protect anyone from coming in and taking it from your family that you left behind? When I think about life insurance and short-term disability and things of that nature, I think about protecting yourself from financial destruction. So these are the things that you protect. The legacy you built and also the disability is protecting your income and you protecting your family as well, because when you’re in those months of not producing for your family, how do you continue to live the lifestyle that you’ve built?

00:18:44 TONYA: Krystal, let’s actually get into that. Let’s get into the disability insurance, because I think a lot of times we talk about life insurance, we talk about health insurance, but disability insurance is something that is even more valuable for freelancers, because your income is not guaranteed. Your retirement is not necessarily guaranteed. Unemployment isn’t necessarily guaranteed. So as a freelancer, disability insurance. I know a lot of people are saying, “Okay, so what is disability insurance?”

00:19:10 JOHN: The way the disability insurance works is you’re going to have what’s called an exemption period, which means if you become injured or disabled, that there’s a certain amount of time before you basically start to get some replacement income. And that’s something that you would talk with an insurance agent about as far as how much income you want to be replaced. You know, the more income that you would want to be replaced, the more that it’s probably going to cost. Just like the rest of the insurance world works as far as purchasing that policy. But it’s typically relatively inexpensive for what you get out of it.

00:19:44 KRYSTAL: And like how you say that elimination period, that falls back into how much do you have saved, because if you decide, okay, thirty days I need my check. Or in 60 days or in 90 days. But having prepared for that. That’s also protecting your finances as well. So when disability comes to play, you have to think about how long would I need this money? So you have those options of a year to three years. You don’t have to take the big, huge large sum, but there’s always a great thing to at least implement something in place. You have something in place, if you were to be injured and could not work for a certain period of time. So having that conversation, it’s pretty hard, but it’s an eye-opener, too. And there’s options to that. So a lot of freelancers don’t understand that by protecting your income, and by purchasing disability, they don’t have to dip into their emergency fund, or their savings account, and those typical things.

This is just another Plan B that’s set aside for them. So when you’re talking about budgeting and things of that nature, are you having something in place that can take care of you and the legacy that you built outside of that? So disability is one of the biggest things that I think that we really don’t touch on, because I think one of the biggest things is that a lot of people go into the workforce, they just assume that the job is always going to be there. and a freelancer, you have to realize, you don’t always have those checks coming in. and then if you get injured, because you’re a one-man show, if you stop doing it, who’s going to be paying your bills at that time?

00:21:09 TONYA: You might feel like, I can’t even afford to pay myself. I can’t afford to pay for disability insurance. But I’ve seen it in action. I had a coworker and their spouse ended up suffering a terminal medical emergency and they did not realize that they weren’t going to be able to work anymore, but they had disability insurance. And for the last years of her life, she ended up relying on that disability insurance to help cover their household bills. And they had built this beautiful life together. But that disability insurance was critical at that time.

00:21:43 KRYSTAL: It’s a safety net.

00:21:41 JOHN: Yeah. The other thing I’d just like to add as far as building your legacy. If you work for a corporation, a lot of times they’re going to have some sort of a retirement plan in place. You know, we’ve all heard of 401Ks and things like that. Well, an IRA, which stands for Individual Retirement Account, is something that’s perfect for a freelancer. That’s basically starting your own retirement account, right? And there’s two main buckets of this, traditional IRAs and Roth IRAs. It’s just basically how are taxes handled? So super-high level, a traditional IRA generally, you’ll get some sort of feel to write off what you’ve put into it and then you pay taxes when you take it out in retirement. The Roth IRA, you typically pay taxes; the money that goes in is after-tax and it would come out tax-free in retirement. Now obviously, today we’re just doing a very high-level overview of what these things are. Do some research on your own. But IRA, Individual Retirement Account, it’s perfect for a freelancer to start saving for retirement.

00:22:34 TONYA: I’m happy you said that, because you can still for retirement as a freelancer. I mean, you might decide, I can do this forever. I love the work that I do, I could do it forever. But you still want to have the option of retiring. You might get to forever and go, look; I don’t want to do this forever. So as a freelancer, you still need to make sure that you’re taking care of your basics, and you want to make sure that you’re planning for the unforeseen with life insurance, health insurance, disability insurance, and you’re still planning for retirement. Let’s have a look at what we’ve learned.

(Music / Chapter 4 Ends with Key Takeaways slide)

(Chapter 5 Begins)

00:23:24 TONYA: Okay, so for our last section, we’re going to cover credit. Credit factors and action steps for freelancers because you need credit as a freelancer. You need credit, period.

00:23:37 JOHN: The credit score is the thing that we often hear about. That’s the number, 300 to 850, the higher the better. And then your credit report is a whole different thing. So those are two separate things. Your credit report, that’s like your transcript of all the classes you took in school, where your credit score is like your final GPA, basically. So everything that’s on the report is what dictates that score. Those factors that we had just covered, that’s all the stuff you’re going to see on your credit report, and that’s what informs what that credit score is going to be.

00:24:05 TONYA: The way your credit score is factored doesn’t change, right, as a freelancer?

00:24:07 JOHN: Yeah. So there’s basically five factors that go into your credit score and they’re all weighted a little bit differently. And nothing’s going to blow your mind here. A lot of it’s going to make sense. But like 35 percent of your credit score is simply do you pay your bills on time? Thirty percent of your credit score is what we call a credit utilization ratio. That’s just a fancy way of saying are you maxed out on your credit cards. Basically your debt to credit. Ideally, you want to be using less than 30 percent of what your available credit lines are. So right there, paying your bills on time and not being too maxed out, that’s 65 percent of what goes into your credit score.

The last three aren’t completely in our control, so they’re not worth as much. Fifteen percent of your credit score is your length of credit history. You want that the longer, the better. Ten percent of your credit score is your credit mix. We look at credit in two types of buckets; revolving credit, which is like your credit cards. You can use them, pay them off, use them. Installment credit, which that’s like a car loan, a home loan. There’s a certain number of installments and then it’s paid off. Ideally, you have a little bit of both. And then the last part, the last part is also ten percent, and that’s what we call credit inquiries, which is basically people looking into your credit. If you want to get a loan, if you want to buy a home, get a new credit card, a lot of times that’s going to be what’s called a hard hit. It is going to be a little ding on your credit. Again, only ten percent of your overall score. And then there’s also what they call a soft hit, which doesn’t hurt your credit score. That would be you looking into your own credit, pulling your own credit report, and a lot of times just think of that as junk mail. Any sort of preapproved things that you get in the mail, that’s going to be considered a soft hit. All of this is very important on a personal basis, but also as a freelancer, as you build your business, as you go out and maybe need to get credit or loans, that’s all going to be, obviously, very applicable to you.

00:25:59 TONYA: Yeah, and the great thing about credit is it’s not based on where you work or how much money you bring in. so as a freelancer, that doesn’t negatively impact your credit score. But the things that you do as a freelancer, say you don’t have that emergency fund and jobs are slow and if you miss a few payments on your credit cards, that could actually affect you as a freelancer. But I also wanted to point out that freelancers are more likely to take out small business loans or you might need to take out a loan to grow your business, once you realize I’m kind of tapped out. I’m ready to go to the next level, but I need a little more cash than I have available to me to grow this business. So then you might go apply for a loan and that’s when your credit really matters. Because then they’re going to look at, okay, so how do you spend your money in your personal life. How are you spending your money as a business owner, and can we trust you to pay us back and can we trust you to make that money back?

00:26:48 KRYSTAL: Especially when you talk about spending. When I think about credit cards and running your business with a credit card, one of the great things I think that’s a good tip is utilizing that credit card for those fixed types of bills. So that way you know this is like what my utility bill is usually, so utilizing that credit wisely and then pay it off, because you know it’s fixed. So you’re already prepared for that. That way that you’re growing your credit, you’re growing the responsibility of using it wisely, and that you will have that option set up, that limit if you want to, because you’ve been paying it on time. You know what these fixed bills are that you’re utilizing it for. I mean, that’s a great way to use a credit card when you’re running a business, especially as a freelancer. Those are healthy tips.

00:27:28 TONYA: Also cash flow, too. Say you have this invoicing software that you use and you haven’t gotten paid yet by a client. You need to make sure that you keep that invoicing software up to date and active. So you might want to put that on a credit card so that you can receive the payment, or so that you can pay your team and so forth, so things can continue to function. If you’re a freelancer, you might not have a team, but as you grow, you might start to bring on contractors, and you want to be able to pay them in a timely manner. Because you want to get your money in a timely manner, the people you owe want to get their money in a timely manner. And sometimes that credit card can help ease that cash flow.

00:27:56 JOHN: Another thing that everybody can do right now is go to AnnualCreditReport.com and check out what your credit report looks like. So your score’s not going to be on there, but you’ll see the report. You’ll see what everything is on there. You want to make sure everything is correct and accurate. And a lot of times nowadays, if you already have a credit card, you may have your score for free on that. If not, there’s a lot of third part websites out there that you can get your score for free. Bottom line, you should never pay for your score or for your report because you can get the report for free at AnnualCreditReport.com and there’s a lot of places for the free score, too.

00:28:30 TONYA: Yeah, definitely. And I just want to reiterate that as a freelancer, your credit is important, but if you’ve had those days, you know, I would love for everyone to have success in business and success in operating on their own, but things happen. And if you’ve fallen behind, the great thing about credit is that you can rebuild it. Let’s have a look at what we’ve learned.

(Music / Chapter 5 Ends with Key Takeaways slide)

00:29:15 TONYA: So freelancing might not always be easy, but I think that we have set a pretty strong financial foundation for freelancers to follow.

00:29:23 KRYSTAL: I agree.

00:29:24 TONYA: John, thank you so much for joining me.

00:29:26 JOHN: Thanks for having me.

00:29:26 TONYA: Krystal, thank you for joining me, too.

00:29:28 KRYSTAL: Thanks for having me as well.

00:29:30 TONYA: Make sure to dig in and explore all of our tools, support, and education, and don’t forget to check out all of our other courses. See you soon.

(MUSIC / END OF COURSE)

Let's form a financial plan for freelancers today with some brilliant insights, relevant coaching, and practical credit tips.

Calling all freelancers: It's time to take control of your finances. This course delivers the tools, support, and lessons you need to help you reach your financial goals.

There are some things you may have to learn the hard way when you're freelancing, but managing your finances doesn't have to be one of them. Listen closely to Tonya Rapley, State Farm® Agent Krystal Brown, and Next Door® Financial Coach John Supple as they deliver sound information to help you build and keep a sound financial plan.

In Financial Foundation for Freelancers, Tonya, Krystal, and John walk you through everything from setting up budgets to thinking through credit and insurance needs. Watch the video and find new ways to set you and your business up for success.

Breaking down Financial Foundation for Freelancers.

This course is conveniently divided into shorter segments so you can enjoy each on your own schedule. Subjects covered include:

Running a business on your own doesn't mean you are alone. Use the guidance in this course to help you construct a budget and benefits to protect yourself and your business.

You don't know what you don't know. So, let's get started on building a financial plan that works for self-employed freelancers.

Freelancing: Getting a lay of the land.

Freelancing offers a ton of variety and freedoms that employees of a single employer don't experience. Typically self-employed, freelancers have the opportunity to choose which projects or companies they'll work for, and which ones they won't.

Work can be hit or miss, so planning and budgeting are essential to help pay the bills through less busy times. Ultimately, the best way to handle the ebbs and flows is to plan.

Watch the video and be sure to download the Financial Foundation or Freelancers worksheet. The worksheet is a great tool and outline to take notes and formulate a plan that works for you.

Write out your financial goals.

Where do you want your business to take you? Where do you see yourself in 3, 5, or 10 years? How can your business help you live the life you've dreamed of?

Freelancer's Tip:
Goals are important - writing them out is even more so. Write out your goals and keep them visible.

Grab a pencil and paper to write out your goals, and be sure to assign some dollar signs and deadlines to each of them so you can keep track of how you're doing. A little bit of determination and diligence can help get you where you want to be, and create an added sense of fulfillment in your work.

You've got to keep them separated.

Your name may be on your business sign, but when it comes to budgeting, keep business and personal expenses separated. One budget helps keep your operations rolling, the other helps you keep food on the table.

Both business and personal budgets need to consider three different types of expenses: fixed, variable, and non-monthly. The Financial Foundation for Freelancers worksheet is a tool to help you itemize and calculate where your money needs to go.

Lastly, don't forget about planning ahead for those non-monthly expenses - check out the video for some great tips.

Don't neglect your benefits.

Self-employment is hard work - there's no doubt about it. So, make a way for every dollar you earn to help you. Plan for expenses and work towards building a benefits package that can protect your future.

Health insurance, life insurance, and disability insurance are all important to factor into your budget.

If you get sick, how will your bills get paid? Same question applies to if you're injured on the job.

Your life's responsibilities deserve your foresight and planning. From insurance to retirement planning, plot out what finances you'll need to keep all you work for and love protected.

Keep a solid credit score.

The phrase "it takes money to make money" resonates with freelancers. Building a client base, traveling to and from your jobs, buying equipment, or even just getting your feet on the ground all costs money. More often than not, these expenses require borrowing money.

Credit is a measure of your financial responsibility that has an impact on your business and personal finances. Given everything you have on the line to grow your business, good credit could be a great help.

Learn what factors impact your credit score and what you could do to correct it. Watch this video and download the Financial Foundation for Freelancers worksheet to get a better understanding of how credit applies to your role as a freelancer.

Get in the know.

The Financial Foundation for Freelancers video handles many topics in a clear and concise way. So, check out the video, download the free tools, and work on setting up your personal and business budgets.